Mortgage interest rates have been hovering below the key 6 percent level for several weeks after peaking in May 2000 and analysts believe the low mortgage rates should prop up home sales in the months ahead.

The latest report showed the inventory of homes available for sales fell to 3.8 months' supply in December from 3.9 months in November.

The Commerce Department said the median price of a new home rose 7.2 percent in December to $186,400 from $173,800 in November. The median new-home price rose 3.4 percent during all of 2002.

The number of new homes that were priced from $150,000 to $199,900 accounted for 25 percent of all sales in December while homes priced higher than $300,000 made up 23 percent of sales.

By region, sales jumped 28.3 percent in the Midwest to 299,000 units, were unchanged in the South at a 462,000-unit rate and declined 7.5 percent in the West to an annual pace of 273,000 units. Sales also declined 12.7 percent in the Northeast to 48,000 units.